Fraud Awareness Week: Man Loses $160,000 In Online Trade Portal Scam

As Fraud Awareness Week kicks off today, the financial ombudsman service, Financial Services Complaints Ltd (FSCL), is reminding New Zealanders to be vigilant when it comes to fraud, following a steady number of complaints about financial scams over the past year.

From online investment scams, identity theft by a partner in a relationship, to scammers using remote access software to get someone’s bank account information, we have seen a wide variety of incidents of fraud this year,” explains Financial Ombudsman, Susan Taylor.

“Perhaps the most common complaint we are seeing is identity theft. Scams can happen to anyone in sometimes the most unexpected ways, and the fraudsters are often very persuasive.

“With online transactions part of everyday life for most New Zealanders, scams are becoming more technologically sophisticated with fraudsters constantly designing new ways of scamming their victims,” said Ms Taylor. “If something seems too good to be true, it probably is.

“Consumers also need to be aware that recovery of fraudulent transactions on credit cards, or from online money transfer services is often difficult with very limited chances of success. They shouldn’t rely on being able to get a refund in place of carefully considering the trustworthiness of those they deal with online.

“If you have been a victim of fraud through a financial service provider and have suffered loss or stress, you can contact us. We are here to help and support consumers through the process,” says Ms Taylor.

Investment scam

One recent case investigated by FSCL, saw a man lose $160,000 after an online trade portal scam.

Jack* had just come into some money when he received an email from an investment firm. The email said the firm provided its customers with a self-directed investment account that enabled them to trade stocks. After clicking on the website link, Jack did a bit of research, and read previous client’s reviews and success and was happy with what he read, so approached the firm to make further enquires.

After signing up, Jack was given access to a purported online trading portal. The portal offered Jack the opportunity to trade dummy shares, and he was amazed with the success he was having with the shares he was given to play around with.

Based on his experience with the portal, Jack authorised the payment of $160,000 to his trade account. As the firm was based in the United States, Jack had to authorise the transfer of the funds through an online money transfer service.

Three months later Jack realised that he had been a victim of an investment scam and that the trading account was a ‘demo’ trading account through which no real-world trades could be made.

Jack notified the money transfer service and requested a recall of his funds. The money transfer service contacted the intermediary bank and requested a recall from the investment fund’s bank. Unfortunately, all the funds had already been withdrawn from the account.

Jack complained that the money transfer service had not done enough to identify the scammers and was unhappy with their efforts to recall the money.

“Although we felt very sorry for Jack, this was a very sophisticated fraud. Once the money has been transferred to the overseas scammer’s account and the scammer has withdrawn the money, it is usually impossible to recover that money, explains Ms Taylor.

“Money transfer services have some protections in place, as the sender of the money, the consumer is best placed to make sure the person they are dealing with is who they say they are and that their business is a legitimate business.

“We often see the scammers proactively reach out to consumers first, which is usually an automatic red flag. If you did not request contact from the specific firm, tread very carefully. Investing money overseas with a company you have never dealt with personally before carries large risks,” says Ms Taylor.

You can read the full case note here.

If people have a problem with a financial service provider, they can make a complaint to FSCL at www.fscl.org.nz, calling 0800 347 257 or emailing complaints@fscl.org.nz

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